Critically discuss the view that the Cournot, Bertrand and Stackelberg Essay

Critically discuss the view that the Cournot, Bertrand and Stackelberg models of oligopoly are fundamentally flawed and are unable to explain recent events in the markets and industries - Essay Example It is a common practice for firms in an oligopoly market to collude in setting up prices with an intention of mitigating the risks that arises in the particular market. However, most of the alliances formed are outlawed in most countries given that they short-change customers because of the less competition that they have unlike in other markets such a perfect competition environment (Vives, 1999). Models developed by three scholars try to explain the concept of an oligopoly market. The Cournot, Bertrand and Stacklerg models are used to explain the theory of oligopoly. The Game theory is widely applied by three models to analyse the market critically under consideration (GineviÄ ius and Krivka, 2008). In a Cournot oligopoly, business entities compete on the basis of production levels. They determine the volume of products they are supposed to produce separately within a specified period. The main assumption made in a Cournot oligopoly is that the core business activity of a business entity is profit maximization. It assumes that the decision of determining the volume level is independent. Furthermore, it is assumed that all players in the market are aware of the cost function and the number of players that exist in the market. However, the cost function may vary from one organization to another (Giocoli, 2003). Some of the implication of the assumptions made in Cournot model is that the production level in the market is likely to be less compared to that of other markets such as the perfect competition market (Kopel and Là ¶ffler, 2008). Additionally, the prices in a Cournot oligopoly are lower compared to those of other markets. Conversely, given the nature of the market, formation of firms are likely to form cartels. Consequently, the model can be transformed to become similar to that of a monopoly market (Day et al., 2002). Cournot models assume firms

Ben and jerry study case Example | Topics and Well Written Essays - 500 words

Ben and jerry - Case Study Example Also, it failed in increasing average return on shareholders’ equity. From 5% in 1997, it had reached till the case writing to 9%, which was not a big leap forward on the shareholders’ money. 2. Do you think that, in general, it is possible for a for-profit company to be committed to â€Å"improve the quality of life of a broad community† and still maximize shareholder value? Why or why not? It is possible for a for-profit company to remain dedicated to the community cause and at the same time record high earnings for the shareholders. Off late social issues of the communities where corporations have their offices have become relevant enough to provide a brand name and image to a company that promises to offer intangible value to the surrounding communities. This intangible value appreciates in time and changes into tangible results later when public at large prefers investing in its shares because of the earned reputation from the social work done to improve the standard of life of the surrounding communities. If I were Henry Morgan, I would recommend the Board to accept the offer made by Unilever. Unilever is the only company that is offering shareholders’ $36 in cash for each share. Offering shareholders the cash return for their investments in Ben $ Jerry’s provides them freedom of investing in any other company. Another company, Meadowbrook Lane is offering $32, which is less in value to the offer made by Unilever. Other than that the proposal made by Unilever offers to include some select members of B&J management in the integrated division of Unilever’s frozen desserts. A conflict of interests arises over Unilever’s proposal to limit social commitments and interests, but this is the same in the proposals of Meadowbrook Lane and Dreyer’s Grand. 4. If you are thinking about starting a new business, would social consciousness be a consideration for you? Was there anything you learned in